China is expected to extend state purchases of domestic soybeans by two months beyond the scheme's planned April expiry; but it is unclear whether the move will have a significant market impact.
Some Chinese traders see limited impact from the move because, while the government purchase period will likely be extended through June, the amount of government purchases is not likely to be changed.
"It could just be a gesture to (support prices), but it doesn't have much actual meaning," Yu Haifeng, an analyst with Tianqi Futures told Dow Jones Newswires.
Estimates are that the government is still 1-2 million metric tons (mmt) short of the 6-mmt target it set earlier for domestic soybean purchases and likely won’t reach that goal by the end of April as the moisture content of most soybeans being offered for sale by producers is too high to meet government standards.
Farmers don't know how to lower the harvest's moisture content, so they won't be able to boost the quality to the government's standard, says Liu Peng, a manager at Longma Consultation in Heilongjiang province.
However, an extension of the purchase program would suggest that China is not likely to release state-owned stocks into the market any time soon. Without such a release, Chinese imports are likely to remain strong through spring.
Chinese traders remained active buyers of imported soybeans last week as the cost of imports remained lower than the government's purchase price for domestic soybeans, even though Chicago Board of Trade soybean futures prices reached three-month highs.
Chinese buyers bought as much as 700,000 metric tons of soybeans from Brazil and "several" U.S. cargoes last week, a trading manager with a major trading house told Reuters News Service.
Traders say China's monthly imports could be close to 4 mmt until June, near the record 4.13 mmt imported last October.
Buyers have also booked more than five U.S. soy cargoes for shipment after October 2009 following the recovery of the domestic breeding industry, particularly hog breeding, the trading manager told Reuters.
A weekly survey by the China National Grain and Oils Information Center indicated Chinese demand for imported soybeans will fall in the coming weeks as domestic supply is ample while global prices keep rising.
The CNGOIC said soybean imports in April-June are expected to remain high, resulting in ample domestic supply for the coming months.
There has been talk in the markets that Chinese buyers may switch some bookings of U.S. soybeans to Brazil as more of that country’s new crop moves into the export pipeline. However, U.S. soybeans were cheaper for Chinese buyers than Brazilian soybeans last week.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.